Franz Enterprises Pty Ltd v Chief Executive, Department of Natural Resources
[1999] QLC 28
•16 April 1999
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LAND COURT
BRISBANE
16 APRIL 1999
Re: AV98-616 -
An Appeal against an Unimproved Value -
Valuation of Land Act 1944 -
Shire of Noosa
Franz Enterprises Pty Ltd
V
Chief Executive, Department of Natural Resources
(Hearing at Noosa)
D E C I S I O N
As at 1 October 1997 the unimproved valuation made by the chief executive of land described as Lot 78 on RP 840223, Parish of Noosa, County of March, containing 5.222 ha, was in the amount of $285,000.
An appeal was lodged against that valuation on the following grounds:(1)Valuation increase is inconsistent with land sales in this area.
(2)Noosa Council Strategic Plan 1997, which dramatically reduces future potential of this property.
(3)Neighbouring extractive industries have increased considerably, and damaged Lake Cooroibah Rd, making the road dangerous.
In the Notice of Appeal, the unimproved value contended for was $150,000.
Mr JH Franz, a director of the appellant company, attended the hearing and gave evidence in support of the appeal. It was Mr Franz's evidence that he was experienced in all aspects of land development from initial acquisition of land stock; the developmental approval process; estate construction and marketing. Being directly involved, he has a keen interest in the local real estate market.
The subject land is located about 9 km by road north of the Tewantin Post Office and formed part of a subdivisional estate developed by Mr Franz. It is located fronting Johns Road as its western boundary, with fan-type shape, widening to an esplanade frontage to Lake Cooroibah. The land is described as being "part of a natural headland and has a gentle cross fall to the south-east boundary. A knoll on the eastern boundary affords 270 degree views over Lake Cooroibah and is the preferred house site" (and is developed with a dwelling). "A natural depression, which has been filled to some degree, traverses the parcel on the centre/eastern end …"
The land is zoned "Rural Pursuits" under the Noosa Shire Council Town Plan gazetted 15 December 1990. However, in the Shire of Noosa Strategic Plan, gazetted 5 September 1997, the land is included in the Preferred Dominant Land Use Designation of "Open Space – Conservation and Waterway Protection".
It was part of Mr Franz's evidence that because of its designation in the 1997 Strategic Plan, the land was not capable of further subdivision, whereas previously it would have been capable of subdivision into five lots. An approval was in existence at the date of valuation for a two-lot subdivision of the subject land.
Mr Franz contends that the market value of the land has been injuriously affected by the loss in subdivisional potential resulting from the gazettal of the Strategic Plan. However, because the land is exclusively used for purposes of a single dwelling house, the chief executive's valuation was made under the provisions of s.17(1) of the Valuation of Land Act 1944, which requires that any enhancement in value resulting from potential for, inter alia, subdivisional purposes, shall be disregarded. As the valuation appealed against was made on the hypothetical basis that no subdivisional potential existed, the gazettal of the Strategic Plan has no further deleterious effect on the artificial value to be found under s.17(1) of the Act.
In the Strategic Plan, a significant area of land in fairly close proximity to the north of the subject land has been identified as having a preferred dominant land use of "Extractive Resource Precinct". Although extractive industry activities have been conducted on that land for a number of years, with consent of Council and, according to Mr Franz, partly illegally, he is of the opinion that there has been already increased extractive industry and associated transport activities, since the gazettal of the Strategic Plan. Mr Franz predicts that such activities will become more intense in the future. The usage of the section of relatively narrow public road near the subject property, by heavy vehicles associated with the extractive industry, causes an increasingly dangerous access to the subject property and, in Mr Franz's opinion, increased market resistance to this rural-residential type locality.
Mr Franz accepted that waterfront homesites attract a premium in value in comparison with non-waterfront sites. However, in his opinion, frontage to the shallow waters of Lake Cooroibah, which with ever-increasing silting, now recede over mud flats some 200 metres in width, could not be compared with other waterfront lands in the locality and in particular those with deep water frontage and boat-mooring potential.
Mr Franz was well aware that an adjoining site, Lot 79 of 2.125 ha, had sold for $245,000, he thought in 1997, but, in his opinion, that sale was at an unrealistically high price. He thought the price would have been influenced by the two-lot subdivisional potential enjoyed by Lot 79 prior to the relevant Strategic Plan. He also believed that the purchasers might not have been aware of the nearby extractive industry activities. He saw it as wrong for a valuation to be based on one sale. As I understood his evidence, in a challenge to a previous valuation when there had been a resale of a nearby lot at a lower price than the previous sale, it had been argued against him that one "low" sale was an unreliable basis. In his opinion, one "high" sale should be similarly regarded as providing an unreliable basis. Lot 79 had been sold by himself in 1994 for $170,000, then resold, according to his information on 1 November 1997 for $245,000. That showed an increase of 44%. The Department's unimproved valuations of Lot 78 and Lot 79 according to Mr Franz, were $120,000 and $90,000 respectively in 1994. He believed that if the resale of Lot 79 was to be used as evidence of value, then the 44% increase in sale price from 1994 to 1997 should be applied to the Department's relevant valuations. That, on his calculations, would result in the valuation of the subject land increasing to $120,000 x 1.44 or $178,280 (sic) ($172,800). From that amount, should then be deducted, in his opinion, an allowance of $50,000 being for the "loss of potential due to new Strategic Plan", leaving on his calculations, a valuation of $128,280, the amount for which he now contends.
The valuation appealed against was made by Mr PJ Haydon, a registered valuer employed by the Department of Natural Resources. The description of the land quoted earlier came from the valuation report tendered through Mr Haydon. In that report, he had recognised the "danger and noise element" associated with vehicles using the Johns Road access to the sand and gravel quarry to the north.
Mr Haydon confirmed in his report that the land, being used for the purposes of a single dwelling, had been valued pursuant to s.17 of the Act, with any subdivisional potential disregarded.
The principal sale on which Mr Haydon relied was that of Lot 79 (RP 840223) of 2.125 ha, adjoining the subject land and to which sale Mr Franz had made reference. However the date of sale was recorded in the Department's records as having been 2 October 1996. Initially that sale price ($245,000) had been analysed to show, as I understood the evidence, an unimproved value of $233,500. The valuation which had been applied to Lot 79, as at 1 October 1997, was $220,000. However, further recent investigation of the sale had shown that certain site improvements with an assessed added value of $15,000, and which Mr Haydon had understood to have been carried out by the purchaser, had in fact been included in the sale price. That reduced the analysed unimproved value to $218,500. As a result the unimproved valuation applied to Lot 79 has, or will be, altered (pursuant to s.28(h) of the Act) to $205,000. The valuation of other waterfront properties in this immediate locality will also be altered to retain relativity. Indeed, Mr Haydon led evidence to the effect that the valuation of the subject land should be altered from $285,000 to $270,000 "to maintain relativity". Further reference to the question of relativity will be made later. In comparison with the subject land Mr Haydon described the sale land, Lot 79, as being smaller in size with inferior aspect from the preferred building site which had lesser views over Lake Cooroibah.
Mr Haydon had spoken to one of the directors of the company which purchased Lot 79 and had been informed that the land had been acquired specifically for the construction of a single dwelling. According to Mr Haydon, the purchasers had been aware of the implications of the Strategic Plan and had been aware of the existence of the extractive industry activities on the nearby land to the north. He was informed that the sale price had been negotiated down from an asking price of $300,000. While Mr Haydon had not inquired specifically as to which Strategic Plan the details of which the purchasers had been aware, he had assumed that it was the Strategic Plan which had been proposed and on public display prior to its gazettal in September 1997. Indeed, Mr Franz was adamant that the sale had not taken place in 1996 but in 1997. If that was the case, any doubt would be removed as to which Strategic Plan had been investigated by the purchaser.
Mr Haydon gave evidence that, in his experience (which extended throughout Queensland), the principal factors affecting market value of waterfront single unit residential sites including river, lake and ocean locations, are "aspect/views, building site, access and locality".
Apart from the principal sale of Lot 79, Mr Haydon provided a schedule containing three further sales, all within the relevant valuation period and all of sites with water frontage.
The second sale was of a site of 2,000 m² with frontage to the northern bank of the Noosa River. That level site had no services other than telephone. Whilst located directly opposite Tewantin, a short distance by water, vehicular access is circuitous "via a part gravel and part sand track". That site had sold in July 1997 for $230,000, showing an analysed unimproved value of $222,500 and a valuation of $200,000 had been applied at the relevant date. In comparison, the following were Mr Haydon's comments – "The sale is of a far smaller site, it is inferior in respect to topography, services, access and potential building site. The sale is superior in respect to deep water anchorage. Overall the sale is considered inferior."
The third and fourth sales were of 4,025 m² and 4,014 m² sites at Lake Weyba, at sale prices in 1997 of $190,000 and $160,000 respectively. The third sale land was described as being an elevated headland site overlooking Lake Weyba with 180 degree views, but inferior to those available from the subject site over Lake Cooroibah. The fourth sale land was a level site with Lake Weyba frontage. The sole purpose for the introduction of the evidence of these sales was according to Mr Haydon, to add support to his opinion that a market premium attributes to elevated waterfront land with aspect and views, in comparison with land at waterfront level.
Mr Franz cross-examined Mr Haydon at length regarding the use of the Sales 2, 3 and 4 but in particular Sale 2. In Mr Franz's opinion, those sales were incapable of cogent comparison with the subject land. He drew a comparison parallel between the sales and the subject land as being somewhat similar to attempting to compare the north bank of the Noosa River (the location of Sale 2) with the prestigious southern frontage where million dollar site sales were the norm.
Mr Haydon's response was that while the waterfront location of Sale 2 and the subject land itself, were clearly different, the market had shown that both locations commanded levels of value in the same general price bracket. He felt that buyers who were seeking land within that price range would consider all local land available and exercise their preference accordingly. He agreed that land with deep water mooring facilities carried a premium in value over land with shallow water access (although not to the degree which had been suggested to him by Mr Franz). However, in the overall comparison process, it was the market which, in his opinion, differentiated between localities through the levels of value capable of being achieved.
Valuation Considerations
The task of the Court is to determine the unimproved value of the land as at the relevant date and not to inquire into market conditions, sales evidence and the levels of value adopted, for the purpose of statutory valuations, at some earlier date. It clearly would be preferable if, in the valuation process, there were a number of sales of readily comparable vacant or lightly improved lots at or about the date of valuation. However, provided reasonable investigation has been made into its circumstances, when only one directly comparable sale is available for consideration, and the background circumstances meet the Spencer test criteria (see Spencer v. Commonwealth of Australia (1907) 5 CLR 418), it would be against valuation principles to disregard that evidence.
I have not been convinced by the evidence and submissions of Mr Franz, that the sale of Lot 79 adjoining the subject land, but clearly inferior to the subject land as a single dwelling site, does not provide a sound basis for the valuation of the subject land. That basis appears to have been applied conservatively by Mr Haydon. It is clear that the second sale used by Mr Haydon although of waterfront land, is of a site difficult to compare with the subject land. By itself, that sale would be given very limited weight in the valuation process. However, Mr Haydon has seen the sale as supporting the "price bracket" evidence provided by the primary sale of the adjoining Lot 79. Nothing has emerged from Mr Franz's local knowledge and experience to convince me that the second sale cannot be considered in that evidential context. The introduction of the third and fourth sales has demonstrated support for the aspect/views thought process which led Mr Haydon to his final conclusion.
Mr Franz has sought to have the Court accept that the 44% increase in the period between the sale and resale of Lot 79 should have been applied directly in the statutory valuation process. However, if a 44% increase was applied to the $90,000 unimproved valuation of the sale land, Lot 79, in the period as calculated by Mr Franz, then Lot 79 would be valued in the amount of about $130,000 as at 1 October 1997, when the resale showed an analysed unimproved value of $218,500. As indicated earlier it is not the task of the Court to inquire into the veracity of an earlier valuation but to decide the matter before it on the evidence available. A valuation of $130,000 for Lot 79 as at 1 October 1997 would be clearly a significant under-valuation based on the actual sale.
In considering the evidence overall, I find nothing to disturb the basis adopted by Mr Haydon. However, as pointed out by Mr Franz, if the valuation of Lot 79 is to be altered from $220,000 to $205,000 then previous relativity would be maintained by reducing the subject valuation from $285,000 to a rounded $265,000 not $270,000 as suggested by Mr Haydon.
Finding
The appeal is allowed, the valuation of the chief executive is set aside and the unimproved value determined in the amount of Two Hundred and Sixty-five Thousand Dollars ($265,000).
RE WENCK
MEMBER OF THE LAND COURT
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